NZ Super sharpens focus on direct investments

The New Zealand Superannuation Fund (NZ Super Fund) is set to increase its focus on direct investments, according to its annual report 2014/15 released this week.

In line with its increased concentration on directs, the fund, which has already upped staff numbers, expects to hire about 10 people over the year, a spokesperson said.

The fund is more active in direct investing and alternatives than most other sovereign wealth funds, NZ Super Fund CEO, Adrian Orr told Private Equity International. Private equity is an important part of the asset mix, he added.

The fund has no pre-set asset allocation for direct investments, including private equity, but has set instead its level of risk, Orr explained.

NZ Super has a 36 percent allocation to alternatives, including 4 percent to private equity, according to PEI’s Research & Analytics division. The fund has NZD 29.5 billion ($19.5 billion; €17.2 billion) of assets.

The fund’s direct investments include stakes in fuel cell manufacturer Bloom Energy, wind turbine developer Ogin and carbon recycling company LanzaTech, in which it made a $60 million investment in December 2014. In August, the fund invested $75 million in US-based View, a manufacturer of dynamic-tinting glass.

In developing its investment model, the NZ Super Fund outlined a number of key trends among other sovereign wealth funds in its annual report, including a greater concentration on direct investments and an increasing focus and discipline on costs, leading to “in-sourcing, co-investment and collaboration”.

The NZ Super Fund has chosen “to co-invest with several funds as opportunities arise,” said Orr. These include the Canadian Public Pension Investment Board, as previously reported.

Successful co-investing and direct investment opportunities rely on transparency and good corporate governance, said Orr, who was appointed chair of the International Forum of Sovereign Wealth Funds at the end of September.

The NZ Super Fund has returned 7.59% over the last 12 months and 9.67% since inception.